How is austerity doing in Europe

[Oldstyle]

Zimbabwe had eighty percent of its industrial capacity wiped out from civil war, and it had its debts denominated in US dollars, which is what caused the hyperinflation. As they printed money, it wasn't being off-out by an increase in real goods and services, which is what caused hyperinflation. All US debts are denominated in US dollars, so the US will always be able to pay its debts.

You're sort of right, Kimura...but if you really think about it...you're completely wrong. Yes, the US can always pay it's debts by printing more dollars. But the people who loan us the money to keep our ship of state afloat aren't stupid...if the value of a dollar decreases then the cost of the loan will be adjusted to reflect that. Our creditors are not going to loan us billions in currency that's worth something only to have us turn around and pay them back in currency that isn't. So yes...we will be able to "pay" our debts but nobody will will oan us money if we don't repay them with something that's worth their investment. This concept that we can keep on doing what we're doing now and somehow wave a "magic economic wand" in the air and have it all work out is amusing.

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

Please, when the Chinese purchase US Treasury notes they are loaning us money! Trying to say that they aren't is just absurd.

 

[Oldstyle]

You're sort of right, Kimura...but if you really think about it...you're completely wrong. Yes, the US can always pay it's debts by printing more dollars. But the people who loan us the money to keep our ship of state afloat aren't stupid...if the value of a dollar decreases then the cost of the loan will be adjusted to reflect that. Our creditors are not going to loan us billions in currency that's worth something only to have us turn around and pay them back in currency that isn't. So yes...we will be able to "pay" our debts but nobody will will oan us money if we don't repay them with something that's worth their investment. This concept that we can keep on doing what we're doing now and somehow wave a "magic economic wand" in the air and have it all work out is amusing.

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Exactly! Let's use a little common sense!!! Just because a government has a printing press in the basement doesn't mean that they then have unlimited amounts of money to spend. It scares me to death that Kimura actually seems to believe what he's saying. Is that what's being taught in economics classes these days? No wonder the college kids are voting for Barry!

 

[Kimura]

You're sort of right, Kimura...but if you really think about it...you're completely wrong. Yes, the US can always pay it's debts by printing more dollars. But the people who loan us the money to keep our ship of state afloat aren't stupid...if the value of a dollar decreases then the cost of the loan will be adjusted to reflect that. Our creditors are not going to loan us billions in currency that's worth something only to have us turn around and pay them back in currency that isn't. So yes...we will be able to "pay" our debts but nobody will will oan us money if we don't repay them with something that's worth their investment. This concept that we can keep on doing what we're doing now and somehow wave a "magic economic wand" in the air and have it all work out is amusing.

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

Please, when the Chinese purchase US Treasury notes they are loaning us money! Trying to say that they aren't is just absurd.

No, they're not. The US government issues the currency. Where do you think the dollars used by the Chinese to purchase securities comes from? It comes from government spending itself. The government first has to add funds to the economy through deficit spending which simply means it's spending more than its taking away from us in taxes. All that 16 trillion in debt represents is the US economy's total holdings of savings accounts (US Treasuries) at the FED. You have to think in terms of an accounting identity.

 

[Kimura]

You're sort of right, Kimura...but if you really think about it...you're completely wrong. Yes, the US can always pay it's debts by printing more dollars. But the people who loan us the money to keep our ship of state afloat aren't stupid...if the value of a dollar decreases then the cost of the loan will be adjusted to reflect that. Our creditors are not going to loan us billions in currency that's worth something only to have us turn around and pay them back in currency that isn't. So yes...we will be able to "pay" our debts but nobody will will oan us money if we don't repay them with something that's worth their investment. This concept that we can keep on doing what we're doing now and somehow wave a "magic economic wand" in the air and have it all work out is amusing.

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Yes, under a fiat system, sovereign governments issue currency out of thin air, which boils down to keystroke entries on a computer. There isn't an entitlement bomb, that's another myth. The US is only inflation constrained, it cannot be revenue constrained under a fiat system as the monopoly issuer of the currency. In other words, federal spending is virtually costless for the government. As I tried to explain to ED, taxes simply regulate aggregate demand (spending power), they don't fund expenditures.

 

[Kimura]

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

yep, he's a 100% ignorant liberal looking for the free lunch that doesn't exist.

I'm ignorant, lol. My three year old is more intelligent than you.

 

[Oldstyle]

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

Please, when the Chinese purchase US Treasury notes they are loaning us money! Trying to say that they aren't is just absurd.

No, they're not. The US government issues the currency. Where do you think the dollars used by the Chinese to purchase securities comes from? It comes from government spending itself. The government first has to add funds to the economy through deficit spending which simply means it's spending more than its taking away from us in taxes. All that 16 trillion in debt represents is the US economy's total holdings of savings accounts (US Treasuries) at the FED. You have to think in terms of an accounting identity.

You must exist in a parallel universe where debt isn't really debt at all but is actually "holdings". I don't care what "identity" you give that 16 trillion dollars...it's still money that we owe...which means it's still DEBT!

 

[Oldstyle]

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Yes, under a fiat system, sovereign governments issue currency out of thin air, which boils down to keystroke entries on a computer. There isn't an entitlement bomb, that's another myth. The US is only inflation constrained, it cannot be revenue constrained under a fiat system as the monopoly issuer of the currency. In other words, federal spending is virtually costless for the government. As I tried to explain to ED, taxes simply regulate aggregate demand (spending power), they don't fund expenditures.

I've got investments with Wells Fargo and Edward Jones...please tell me that you don't work for either. The thought of my hard earned money being "managed" by someone who believes the nonsense that you do would keep me up nights.

Seriously...do you really believe the stuff you're spouting here?

 

[Kimura]

Please, when the Chinese purchase US Treasury notes they are loaning us money! Trying to say that they aren't is just absurd.

No, they're not. The US government issues the currency. Where do you think the dollars used by the Chinese to purchase securities comes from? It comes from government spending itself. The government first has to add funds to the economy through deficit spending which simply means it's spending more than its taking away from us in taxes. All that 16 trillion in debt represents is the US economy's total holdings of savings accounts (US Treasuries) at the FED. You have to think in terms of an accounting identity.

You must exist in a parallel universe where debt isn't really debt at all but is actually "holdings". I don't care what "identity" you give that 16 trillion dollars...it's still money that we owe...which means it's still DEBT!

First of all, for every liability, there must be a corresponding asset.

It should be abundantly clear that a Treasury security is nothing more than a glorfied savings account. If I purchase a Treasury security today, I'm sending my dollars to the FED and at some point in the future, they'll send those dollars back to me, with some interest. This is the reality with any savings account at a retail bank. I deposit dollars, they send me back the dollars with some interest. Let's say, for the sake of argument, that my bank decides to purchase $500,000 dollars worth of US Treasury securities. In order to pay for those securities, the FED decreases the total amount of dollars my bank has at its reserve account over at the FED by $500,000 dollars, then they'll add $500,000 dollars to my bank's savings account (Treasury securities) at the FED.

Therefore, when the US government 'borrows money', all it's actually doing is shifting funds from reserve accounts (checking accounts) at the FED to savings accounts (US Treasury securities). This is why the 16 trillion in 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED.


I hope this clears up any misconceptions about the operational realities of our monetary system. This is common knowledge among 99% of people working in the bond markets.

 

[Kimura]

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Yes, under a fiat system, sovereign governments issue currency out of thin air, which boils down to keystroke entries on a computer. There isn't an entitlement bomb, that's another myth. The US is only inflation constrained, it cannot be revenue constrained under a fiat system as the monopoly issuer of the currency. In other words, federal spending is virtually costless for the government. As I tried to explain to ED, taxes simply regulate aggregate demand (spending power), they don't fund expenditures.

I've got investments with Wells Fargo and Edward Jones...please tell me that you don't work for either. The thought of my hard earned money being "managed" by someone who believes the nonsense that you do would keep me up nights.

Seriously...do you really believe the stuff you're spouting here?

I wouldn't investment any money with those geniuses, but that's your problem.

Seriously, you'd be better off with a Roth or traditional IRA in a bond fund which yields 4%-5% per year if you're a conservative investor. It also depends if you have a 401k at your place of employment. I'm a little more aggressive, so I have my Roth in a REIT, with some aggressive growth mutual funds here and there.

*Disclaimer* - This is not investment advice

 

[Kimura]

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Exactly! Let's use a little common sense!!! Just because a government has a printing press in the basement doesn't mean that they then have unlimited amounts of money to spend. It scares me to death that Kimura actually seems to believe what he's saying. Is that what's being taught in economics classes these days? No wonder the college kids are voting for Barry!

For the umpteenth time, all government spending is 'printing money'. This is how a fiat monetary system operates, we're no longer on a gold standard, but people seem to be under the mistaken impression we are for some reason. I'm simply trying clear up the misconceptions, falsehoods and out right lies being told to the general public by various talk radio and media douchebags.

 

[Norman]

The US government doesn't have to borrow that which it creates as the sovereign issuer of the currency. We really aren't 'loaned' money. The federal government spends/creates money by writing Treasury checks or by crediting private, commercial bank accounts. For example, when the Chinese purchase US Treasuries, it uses dollars that come from government spending itself. Those dollars had to come from somewhere. Treasuries are basically glorified savings accounts at the end of the day. In point of fact, all bond sales do is drain excess reserves in the banking system, that's about it.

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Yes, under a fiat system, sovereign governments issue currency out of thin air, which boils down to keystroke entries on a computer. There isn't an entitlement bomb, that's another myth. The US is only inflation constrained, it cannot be revenue constrained under a fiat system as the monopoly issuer of the currency. In other words, federal spending is virtually costless for the government. As I tried to explain to ED, taxes simply regulate aggregate demand (spending power), they don't fund expenditures.

Yes, there is no entitlement bomb, because US can just print money to pay the retirees, without even an opportunity cost. Even if there is going to be a ratio of 3:1 retirees to working population(purely hypothetical) the retirees having no savings; The magical act of printing money will save the day because it will stimulate the remaining working people with monetary steroids, making them 1000% more productive even as they get to keep less and less of their incomes, having to pay for the retirees.

Wait what?

Seriously, you need to think these in real terms a bit more. In your universe printing money can solve any problem, and nominally it may actually do just that. But not in real terms. People live in real world not in the nominal one. The retirees may get their money, but it won't be able to buy much as productivity won't keep up.

Same can be said of the debt problem. The debt of USA's is very real, every month about 45 billion worth of products get net imported. And worst of all it's used to fund mostly consumer spending and service industries that can not help the debt down in the future. Inflating the goverment debt away is not as easy as it sounds either, the investors are not THAT stupid, even though the extremely overvalued dollar could tell otherwise. One day it might just prick like any bubble.

 

[EdwardBaiamonte]

we're no longer on a gold standard, but people seem to be under the mistaken impression we are for some reason. I'm simply trying clear up the misconceptions, .

OMG a free lunch fool liberal trying to clearup misconceptions??????

When Ron Paul asked Bernanke why we don't switch to a gold standard he said there was no need because the Fed operated as if it was on a gold standard.

The idea that we could drop gold, freely print money, and freely go into debt without hugely negative consequences is something so stupid that only a liberal could believe it.

 

[EdwardBaiamonte]

For the umpteenth time, all government spending is 'printing money'.

of course thats stupid and liberal . If the governemnt taxes and spends it is not printing money. It may have printed the money originally but no new printing takes place at any point in the tax and spend process.

see why we are positive a liberal will be slow??

 

[EdwardBaiamonte]

Therefore, when the US government 'borrows money', all it's actually doing is shifting funds from reserve accounts (checking accounts) at the FED to savings accounts (US Treasury securities). This is why the 16 trillion in 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED.

this is true in an operational sense as you say but that has nothing to do with our subject. You are confused because you lack the IQ to know what the subject is. The subject is whether the economy benefits through deficits debt and inflation.

It does not benefit. If soviet liberal bureaucrats in Washington knew where to spend and invest better than the private sector the more they spent no matter what the source of funds it would be a good thing. But since they don't know where to invest, being mere bureaucrats, they waste the nations scarce resources and the economy declines.

Simple enough for even a liberal?

 

[Kimura]

For the umpteenth time, all government spending is 'printing money'.

of course thats stupid and liberal . If the governemnt taxes and spends it is not printing money. It may have printed the money originally but no new printing takes place at any point in the tax and spend process.

see why we are positive a liberal will be slow??

You're beyond confused. We're no longer on the Bretton Woods system - a fixed-exchange rate system that existed post-WWII until 1971 - whereby the US government was revenue-constrained because the FED could only allow a certain amount of money in the economy related to its holdings of gold and the currency value. This meant if the government wanted to spend more money, it had to take money from someone else in the economy so that the money supply would be a constant so to speak. Under our old system, yes, the US government had to borrow or tax to spend. This no longer applies because we now use fiat as opposed to convertible currencies.

In modern day America, the currency obtains legitimacy through legislative fiat: the US government declares the currency's value and follows up with legislation. What gives it value is that all tax obligations must be paid with US dollars, there's no way around this fact, which creates demand for the currency, thus giving intrinsically worthless paper value. This means a national government, such as the United States, can never be in short supply of the currency or run out of money. It doesn't need you or I to lend it money in order to generate revenue, it can never run out of money. This is why a monopoly issuer of the currency, such as the US, Japan, Australia, the UK, or Canada, can never be revenue-constrained.

Government spending is the first act in a fiat system. It precedes taxing and 'borrowing'. The government is effectively taxing and borrowing back money it already spent. We cannot obtain dollars, nor can OPEC, the Chinese or the rest of the world, until the government spends them into existence.

I hope this clear up the your false premise which is akin to believing in a flat earth from an economic perspective.

 

[Kimura]

Therefore, when the US government 'borrows money', all it's actually doing is shifting funds from reserve accounts (checking accounts) at the FED to savings accounts (US Treasury securities). This is why the 16 trillion in 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED.

this is true in an operational sense as you say but that has nothing to do with our subject. You are confused because you lack the IQ to know what the subject is. The subject is whether the economy benefits through deficits debt and inflation.

It does not benefit. If soviet liberal bureaucrats in Washington knew where to spend and invest better than the private sector the more they spent no matter what the source of funds it would be a good thing. But since they don't know where to invest, being mere bureaucrats, they waste the nations scarce resources and the economy declines.

Simple enough for even a liberal?

I've explained it ten different ways: deficits create net financial assets under a fiat system. Get over it. If you want the government sector to be in surplus, then the domestic private sector will have to run a deficit. There's no way around this.

 

[Kimura]

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Yes, under a fiat system, sovereign governments issue currency out of thin air, which boils down to keystroke entries on a computer. There isn't an entitlement bomb, that's another myth. The US is only inflation constrained, it cannot be revenue constrained under a fiat system as the monopoly issuer of the currency. In other words, federal spending is virtually costless for the government. As I tried to explain to ED, taxes simply regulate aggregate demand (spending power), they don't fund expenditures.

Yes, there is no entitlement bomb, because US can just print money to pay the retirees, without even an opportunity cost. Even if there is going to be a ratio of 3:1 retirees to working population(purely hypothetical) the retirees having no savings; The magical act of printing money will save the day because it will stimulate the remaining working people with monetary steroids, making them 1000% more productive even as they get to keep less and less of their incomes, having to pay for the retirees.

Wait what?

Seriously, you need to think these in real terms a bit more. In your universe printing money can solve any problem, and nominally it may actually do just that. But not in real terms. People live in real world not in the nominal one. The retirees may get their money, but it won't be able to buy much as productivity won't keep up.

Same can be said of the debt problem. The debt of USA's is very real, every month about 45 billion worth of products get net imported. And worst of all it's used to fund mostly consumer spending and service industries that can not help the debt down in the future. Inflating the goverment debt away is not as easy as it sounds either, the investors are not THAT stupid, even though the extremely overvalued dollar could tell otherwise. One day it might just prick like any bubble.

I don't understand where this 'printing money' meme comes from. All government spending is 'printing money' under a fiat system, regardless of tax revenue or bond sales. The government needs to spend money into existence through spending before we can obtain it.

As I tried to explain, the 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED. We can look at it another way: the US deficit simply reflects the public's desire to save. Basically, if the the public wishes to save, then budget deficts have to occur as a basic accounting identity. The 'US debt' is the stock of its aggregate deficits which are equal, down to the last penny, to the stock of its net financial assets held by the domestic private sector.

You also seem inordinately preoccupied with the US trade deficit. The trade deficit is actually a positive and has enabled Americans to enjoy a tremendous standard of living, but that's another story.

There isn't an entitlement bomb. Congress can guarantee these programs into perpetuity through legislation, similar to Medicare Parts B and D. The only problem going forward, as you pointed out, is that of inflation. The US government can create any amount of dollars it so desires. The issue going forward is if that spending will result in a sufficient quantity of the real assets required for retirees. Real assets are food, shelter, medical care, etc. that are needed by to sustain them during retirement. As long as the US has real stuff, the paying for it part is easy, it's a matter of the government cutting checks. As long as the supply of real goods and services increases in tandem with the amount of checks being sent out, there is no inflationary risk whatsoever.

However, I will concede, if the US government does spend more than the amount of real goods and services being produced, then we'll have an inflation problem. This is the only threat to entitlements in the future.

 

[EdwardBaiamonte]

This no longer applies because we now use fiat as opposed to convertible currencies.

As I said, when asked by Ron Paul, Bernanke said he operated the Fed as if it was on a gold standard!! A fiat system is not a libturd free lunch system. The liberal government can print and spend trillions and trillions and it won't help to invent one new product or improve our standard of living one tiny bit. Is that really over your head?? What it will do is create mal investment bubbles that will distort the economy and slow growth or cause recessions or depressions. Once again dear there is no free lunch!! Why not write that 100 times
and see if it sinks in???

 

[EdwardBaiamonte]

deficits create net financial assets under a fiat system. :

and does this improve our standard of living??????????????????

Isn't thinking fun?? Are you going to try to change the subject again or are you going to answer the question????

 

[EdwardBaiamonte]

Yes, under a fiat system, sovereign governments issue currency out of thin air, which boils down to keystroke entries on a computer. There isn't an entitlement bomb, that's another myth. The US is only inflation constrained, it cannot be revenue constrained under a fiat system as the monopoly issuer of the currency. In other words, federal spending is virtually costless for the government. As I tried to explain to ED, taxes simply regulate aggregate demand (spending power), they don't fund expenditures.

Yes, there is no entitlement bomb, because US can just print money to pay the retirees, without even an opportunity cost. Even if there is going to be a ratio of 3:1 retirees to working population(purely hypothetical) the retirees having no savings; The magical act of printing money will save the day because it will stimulate the remaining working people with monetary steroids, making them 1000% more productive even as they get to keep less and less of their incomes, having to pay for the retirees.

Wait what?

Seriously, you need to think these in real terms a bit more. In your universe printing money can solve any problem, and nominally it may actually do just that. But not in real terms. People live in real world not in the nominal one. The retirees may get their money, but it won't be able to buy much as productivity won't keep up.

Same can be said of the debt problem. The debt of USA's is very real, every month about 45 billion worth of products get net imported. And worst of all it's used to fund mostly consumer spending and service industries that can not help the debt down in the future. Inflating the goverment debt away is not as easy as it sounds either, the investors are not THAT stupid, even though the extremely overvalued dollar could tell otherwise. One day it might just prick like any bubble.

I don't understand where this 'printing money' meme comes from. All government spending is 'printing money' under a fiat system, regardless of tax revenue or bond sales. The government needs to spend money into existence through spending before we can obtain it.

As I tried to explain, the 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED. We can look at it another way: the US deficit simply reflects the public's desire to save. Basically, if the the public wishes to save, then budget deficts have to occur as a basic accounting identity. The 'US debt' is the stock of its aggregate deficits which are equal, down to the last penny, to the stock of its net financial assets held by the domestic private sector.

You also seem inordinately preoccupied with the US trade deficit. The trade deficit is actually a positive and has enabled Americans to enjoy a tremendous standard of living, but that's another story.

There isn't an entitlement bomb. Congress can guarantee these programs into perpetuity through legislation, similar to Medicare Parts B and D. The only problem going forward, as you pointed out, is that of inflation. The US government can create any amount of dollars it so desires. The issue going forward is if that spending will result in a sufficient quantity of the real assets required for retirees. Real assets are food, shelter, medical care, etc. that are needed by to sustain them during retirement. As long as the US has real stuff, the paying for it part is easy, it's a matter of the government cutting checks. As long as the supply of real goods and services increases in tandem with the amount of checks being sent out, there is no inflationary risk whatsoever.

However, I will concede, if the US government does spend more than the amount of real goods and services being produced, then we'll have an inflation problem. This is the only threat to entitlements in the future.

dear, with the Fed balance sheet now well over 3 trillion it is a huge concern that many fear Bernanke cant resolve without a huge inflation!!